We are in a great investor climate right now. Property prices are stable in most markets and rents just keep on rising. The percentage of new loan applications from investors hit a peak of 37.7 per cent in September, according to Australia's largest mortgage aggregator, AFG, indicating interest in property as an investment asset class is growing – particularly among self-managed super investors.
While I've always advocated capital growth over yield as the main priority with property investment, the yield remains important. For most landlords, it's the main means of covering in-part or in-full the mortgage repayments on their investment loan. Due to today's demand, investors can generally achieve up to five to six per cent yield which goes a long way to help cover a mortgage in the six to seven per cent interest rate range, which is where we are now.
New figures from Australian Property Monitors show rents are up or stable in every capital city over the past year to September quarter, with the one exception of Hobart where house rents are up 1.6 per cent but apartment rents are down six per cent. Everywhere else, it's all positive news for investors.
Here's the statistical breakdown:
Sydney – houses 3.1 per cent, apartments 4.5 per centMelbourne – houses zero per cent, apartments zero per cent Canberra – houses 3.3 per cent, apartments 4.9 per centBrisbane – houses 2.8 per cent, apartments 5.9 per centPerth – houses 2.7 per cent, apartments 5.7 per centAdelaide – houses zero per cent, apartments 1.9 per centDarwin – houses zero per cent, apartments 5.9 per cent Hobart – houses 1.6 per cent, apartments minus six per cent.
*Source: Australian Property Monitors Year on Year Sept Qtr 2011
Two things determine the rental return of your property – the demand in the marketplace and the appeal of the property itself. Right now, demand is high so there is a natural increase in rental property values. But if you want to increase the rent further, there are many small things you can do to add serious value. Take a look at these ideas.
Install built-ins – few people cart around freestanding wardrobes these days. If one of the bedrooms doesn't have built-ins but has the space for them, put them in.New curtains or blinds – new window coverings not only improve the décor, they also add privacy. Install a skylight – this is a quick and inexpensive way to bring more natural light into dark houses. Put in a barbecue – no Australian home should be without a barbecue! They can turn a dull backyard into an outdoor entertaining area, especially with the addition of some paving and a pergola.Install a dishwasher – tenants will pay more for a property with a dishwasher and you can depreciate it for tax purposes too. Replace light fittings/switches/doorknobs – for a small outlay you can modernise the look of your property very easily.
When selling, a buyer is unlikely to walk away because the kitchen doesn't have a dishwasher or they don't like the curtains because these are things they can immediately rectify after the purchase. Tenants don't have the same options, so they're more likely to walk away over small things. Make your investment property super appealing and you'll command a higher rental return.
